House unveils 2013 budget

PROVIDENCE – A House Finance Committee meeting to unveil the General Assembly’s 2013 budget was delayed by about four hours Thursday due to last-minute wrangling about what would be in and out of the final document.
There was good news and bad news for hard pressed cities and towns in the budget, which will be debated and voted on by the full House of Representatives next Thursday.
Central Falls will receive a $2.6 million allocation to ease some of the harsher provisions of the city’s plan to emerge from bankruptcy.
Central Falls Receiver Robert Flanders and state officials had asked for the $2.6 million to supplement the pensions of police and firefighter retirees that had been cut by up to 55 percent in the immediate aftermath of the city’s bankruptcy. That request was part of a deal to keep the retirees from challenging the cuts in court. The money will be used to bring the pensions up to 75 percent of the value of the pensions before the cut for a five-year period, after that, the pensions will revert to the 45 percent value unless further steps are taken at that time.
“We all know what happened to Central Falls,” House Finance Chairman Helio Melo told reporters at a budget briefing. “Central Falls retirees received a 55 percent cut in their pensions. They received an excessive co-pay on their medical insurance, they lost their life insurance policies. I don’t know what other communities out there would want to follow that.
However, proposals by the governor to allow communities with pension plans that are funded at 60 percent or less to suspend cost-of-living adjustments (COLAs) and capping the age of retirement and other municipal pension provisions at the level of the state pension plan after last fall’s comprehensive reform legislation did not make the final version of the budget.
When asked about his package of municipal bills on Thursday before the House panel met, Chafee told reporters, “I assume they are going to water it down; they don’t have the guts to tackle a real issue head-on.” He said that, because of the deal reached earlier this week between the city of Providence and its retirees, “they will probably use that as an excuse to say we don’t need it. But we’re now moving into Woonsocket and West Warwick and other communities like Pawtucket, where all the contracts expire many of them, if not all of them June 30 could really benefit from that municipal package.”
Chafee’s proposal for an additional 2 percent tax on restaurant meals, bringing that tax to a total of 10 percent, did not make it into the General Assembly’s plan. It ran into a firestorm of opposition from well-organized restaurant owners, who said it would further hurt their businesses, which were already damaged by the state’s lagging economy.
The $39.5 million that tax would have raised was slated to be used to accelerate the phase-in of the school funding formula. The formula is still going to be accelerated, but with other revenues.
Lawmakers had about $102 million more revenue to work with because of rosier assessments of the money the state will have to work with from the May revenue estimating conference. The governor was required by law to work with lower estimates generated last October.
The four cents per pack increase in the cigarette tax recommended by Chafee is included in the legislative budget. The tax -- now at $3.46 a pack and suggested to go up to $3.50, expected to bring in $4 million -- is particularly significant in border communities like Woonsocket, Pawtucket, Cumberland, Burrillville and North Smithfield because retailers there fear that smokers will cross the state line into Massachusetts communities to avoid the tax and end up buying other items there as well, hurting business and reducing the amount Rhode Island receives in sales tax.
Woonsocket Rep. Robert Phillips had proposed lowering the cigarette tax by $1 a pack, to $2.46, to capture sales from Massachusetts customers and make up in volume sales what it would lose by dropping the rate. That bill did not make it out of committee.
The governor’s proposal to expand the state’s 7 percent sales tax to include, among other things, pet grooming (but not veterinary services), taxi and limousine rides, car washes, and clothing and footwear that costs $250 or more (the clothing and shoe tax, estimated to bring in $1.8 million, would start Oct. 1)
Chafee’s plan to tax rentals of summer homes and bed and breakfast places was scuttled.
There will be a tax amnesty later this fall in which people who owe the state back taxes will be able to pay them without being assessed a penalty for being late.
Lawmakers plan to restore $9.6 million in cuts to those who care for the developmentally disabled and $1.8 million for Medicaid dental benefits.